Differences remain as due diligence on GM Korea begins

By Jennie Oh  |  Updated March 12, 2018 at 6:15 AM
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SEOUL, March 12 (UPI) -- Unresolved differences remain between General Motors Korea and its second largest shareholder Korea Development Bank as due diligence on the company begins this week.

According to South Korea's trade ministry, KDB launched the long-due review on Monday morning with a meeting at GM's Bupyeong plant, west of Seoul, News 1 reported.

The U.S. automaker last month announced its decision to scrap its Gunsan plant and decide on the fate of its remaining factories in the country, claiming that local operations have been unproductive.

The ailing company has requested government subsidies through KDB and tax benefits in return for a debt-to-equity swap on loans from GM headquarters and the allocation of new cars to South Korean plants.

With thousands of jobs at stake, local authorities have requested due diligence to examine why the company fell into the red before deciding on state support to keep operations up and running.

GM Korea is believed to have provided its locally manufactured cars to GM outlets worldwide at excessively low prices as well as paying higher-than-average interest on loans from its parent company.

KDB aims to look into the suspicions as well as costs for management, technology and labor.

However, the format and the period of due diligence still haven't been determined. The review was delayed for about three weeks, as GM did not submit documents requested by the bank.

According to Yonhap, KDB Chairman Lee Dong-gull told reporters, "There were differences between the KDB and GM over the conditions involving due diligence, but they reached an overall agreement on various aspects."

Bank officials say the U.S. company is still showing reluctance on disclosing vital information, with GM International's President Barry Engles complaining last week that the due diligence is too strict, Maeil Business Daily reported.

It appears GM wishes to wrap up the review within a month, while KDB is pushing for a thorough audit of the company's management, citing its lack of transparency over the years.

Meanwhile, GM Korea on Monday requested the governments of South Gyeongsang Province and Incheon City to designate its factory sites as foreign investment zones, making it eligible for seven years of tax benefits.

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